Bankers and lawyers see no signs of merger and acquisition activity abating in the next six months, as private equity firms step up to make further deals and as infrastructure-related transactions continue to attract interest.

Local private equity funds such as Pacific Equity Partners and Archer Capital are seeking to deploy capital raised in their funds. More broadly, across many sectors, there is a real sense that the deal flow will continue to be strong.

JPMorgan’s local head of mergers, Jon Gidney, said activity in the next six to 12 months would be buoyed by “cashed-up" private equity and Australian companies moving to strategically position for scale. Infrastructure and the oil and gas sector would continue to stand out as busy areas for activity.

“The sharemarket is rewarding accretive and synergistic M&A," Mr Gidney said. “That gives us a perspective that these buoyant conditions have some time to run."

Australian M&A volumes in the first half of 2014, including inbound and outbound, swelled to their highest level in three years.

Return of private equity

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Minter Ellison partner Alberto Colla is also of the view that private equity will be a notable force locally in the next six to 12 months.

“The approaches by KKR [& Co] for Treasury Wine Estates and Pacific Equity Partners for SAI Global
in the second half of financial year 2014 are expected to herald the return of private equity bidders to Australia," he said in a report that noted drivers of activity.

Other factors that would buoy activity included more offers by locally listed acquirers, a continuation of foreign bidding interest, and shareholder and global fund activism. Privatisation across states is also being closely watched as governments look to bolster their budget coffers.

Grant Chamberlain, head of mergers at Bank of America Merrill Lynch: “One of the key trends this year has been the resurgence in larger transforming deals and public takeovers, both of which were rare in 2013. Based on our pipeline we expect that trend to continue in the second half."

There has also been a lot of local debate about whether global activist funds will increasingly eye entering the Australian market. Global activist funds typically target break-up situations as well as cashed-up companies able to readily release capital.

“There are not many of those situations in Australia," Mr Gidney said, noting JPMorgan’s analysis suggested there were about 15 companies in the ASX 100 that may attract the attention of global activist funds. US fund Lone Star is one example that is, however, causing ructions at
Antares Energy
.

Overall the average premium for takeovers valued at more than $200 million in 2013-14 was 35.5 per cent, according to the Minter Ellison report.